Adani shares tumbled after Hindenburg accused the company of manipulation and fraud

Shares of Adani Group companies fell after prominent US activist investor Hindenburg Research LLC said it would reduce the empire’s stake.
Billionaire Gautham Adani’s flagship Adani Enterprises Ltd and Adani Ports and Special Economic Zone Ltd fell 2.5% and 5% respectively on Tuesday. – Allegations of corporate malfeasance follow a two-year investigation into the president’s companies. Cement makers ACC Ltd and Ambuja Cements Ltd, recently acquired by Adhani, also fell.

Hindenburg’s report describes a web of offshore shell companies controlled by the Adani-family from the Caribbean, Mauritius and the United Arab Emirates. Companies.

Adani Group representatives did not immediately respond to calls and emails seeking comment, saying the company would issue a statement later.

The report came on the same day that a major share sale from Adani Enterprises is set to open for subscription, aiming to attract a wider network of investors.
The broadside from Hindenburg comes at a critical time for the ports-energy chief. Adani is looking to boost its international profile and is aggressively branching out into new businesses, including cement and media. In his power base India, he enjoys a close relationship with Prime Minister Narendra Modi. The Adani empire’s expansion plans are closely aligned with the government’s growth and economic goals.

Adani topped the Bloomberg Billionaires Index last year, surpassing the likes of Bill Gates and Warren Buffett, and his fortune now stands at $118.9 billion, making him the world’s fourth-richest.

A major research organization, Hindenburg is best known for its critical reports on the electric vehicle space. In 2020 it played a key role in bringing down e-truck company Nicola Corp, which Hindenburg accused of building “dozens of lies”. Nicola founder Trevor Milton eventually stepped down as chairman and was found guilty of securities fraud. More recent targets include Clover Health and Lordstown Motors.

Hindenburg said it has taken short positions in Adani’s companies through US-traded securities and Indian non-traded derivatives. “Even if you ignore the findings of our investigation and take the Adani Group’s financials at face value, its 7 major listed companies have seen an 85% fall on a purely fundamental basis due to sky-high valuations,” Hindenburg said in the statement.

Adani’s companies trade at several times the price-to-earnings ratio of peers in India and around the world, including companies in rival chairman Mukesh Ambani’s Reliance empire – the forerunner of Adani, Asia’s richest man. There are few signs of the bull run abating, with most Adani Group shares starting to fall even before Hindenburg’s report.

Investors and analysts have expressed concern over the high levels of debt seen in Empire’s listed units. Total Debt of Six Adani Companies – Adani Enterprises Ltd. Adani Green Energy Ltd., Adani Ports and SEZ Ltd., Adani Power Ltd., Adani Total Gas Ltd. and Adani Transmissio Ltd. – stood at Rs 1.88 trillion at the end of March. 2022.